Sequana: Directors' Duties And Creditors

The Supreme Court in England in BTI v Sequana [2022] UKSC 25 has clarified when directors owe duties to the company that should take into account creditors' interests. The decision will be highly persuasive in the Cayman Islands on directors' duties.

In office, directors should consider whether or not the company (i) is insolvent, (ii) is bordering on insolvency, or (iii) whether insolvency is probable. If so, then they must take into account creditors' interests to a greater or lesser degree. If the company is insolvent or insolvency is inevitable, then creditors' interests are paramount and override those of members. Short of that threshold, a balance must be struck between the interests of creditors and those of members, depending on the precise financial situation. In terms of when the duty arises, it is clear that it is insufficient that the company is 'likely to become insolvent at some point in the future'.